21st -century corporations look like....
Most people overestimate the effects of change in the short term, underestimate them in the long term and fail to spot where change will be greatest. Nowhere is this judgment truer than with new technologies. The Internet stock-market bubble, like the bubble in railway stocks in the nineteenth century, reflected overestimates and misjudgments of the potential impact of new communications. And as with railways, the bubble burst, leaving lots of empty hands but an infrastructure that survived—and changed the world. There will be evolution, rather than revolution and it will take many years to work through. Recall that even though the telephone was first used commercially in the 1870s, telephone banking did not spring up until the 1980s. Consider that the Internet had been in commercial use for a mere seven years by the time recession struck. Profound change rarely comes fast.
In the 21st century, we will see increased communication, dependence and assistance among people around the world. In each hemisphere, people’s dependence upon one another is growing. Business organizations, government agencies and private companies – including non – profit organizations and non – governmental organizations – jointly use products, capital and human resources. They want to expand production, capital and resources together and also expand into other parts of the world. To overcome competitors therefore, new management methods are needed. To achieve targeted results, managers need to have a detailed knowledge and understanding of management-related subjects.
The biggest changes will inevitably be those that go with the grain of what is already happening. Internet technologies will thus reinforce outsourcing, a trend that has been in progress for at least two decades. They will further reduce inventory, a move that began long ago with just-in-time lean production. They will bolster globalization, allowing companies to manage overseas operations and connect with foreign suppliers in more intricate ways. They will highlight the emphasis on the customer that so many companies strive to achieve. They will accentuate the need for talented and inventive people, who will have an even sharper idea of their financial worth on the world market for human capital. They will enable the flat structures of modern businesses to operate more effectively and make them even less hierarchical.
Indeed, one of the truly remarkable things about these technologies is the extent to which they reinforce trends already under way. This reflects the fact that many of the things they do are not entirely new: Proprietary electronic networks have long allowed large companies to do what smaller firms can now emulate. But such networks, and packaged software applications such as ERP, tend to be cumbersome and expensive, forcing companies to accommodate them. By comparison, the Internet is flexible, accessible, inexpensive, and ubiquitous.
In the future, Internet technologies will give companies new control over their relations with their customers. The Internet will not just widen reach, allowing companies to reach new markets; more important, it will provide ways to deepen existing relationships. Here, as in many other areas, the development of a culture of trust will do the most to deepen the relationship. In addition, companies will develop more sophisticated tools to identify their most profitable customers, to retain them, and to sell them extra products. They will find subtle ways to price discriminate, for example, through developing two familiar concepts, loyalty schemes and clubs.
Given the importance of creativity and new ideas to corporate success, companies must work harder than ever to recruit and retain the right staff and to create a corporate culture that encourages loyalty and effective collaboration. With recruitment, as with customer management, identifying those people likely to contribute most to corporate profitability and concentrate on retaining and developing them will be critical. With staff, as with customers, acquisition costs will encourage companies to care about retention because profits per worker take time to accrue.
One of the earliest and most visible effects of Internet technologies is on purchasing. Here, a genuinely new business model has arisen: the electronic exchange, which will take several different forms, but will be built around a single standard that will allow different industries and different companies within an industry to transact freely with one another. In networks and in marketplaces, applying determined standards is one of the keys to realizing value. In purchasing within individual companies, central discipline will also be essential if companies are to benefit from savings and from new suppliers.
More far-reaching will be the impact on the management of supplier networks. Here, the key will be the power of Internet technologies to make information available simultaneously to many different points in a system. The transformation of the supply chain into an ecosystem will bring the biggest rewards when the whole production process can become more modular, so that different stages that once took place sequentially can now occur simultaneously. That change will speed production, reduce output, and increase the flexibility with which companies can respond to changing customer tastes.
In the past, the costs of transferring information have been one of the main factors determining the structure of the company. Now, that is far less true, and the consequence is that companies can make decisions about whether or not to outsource some process or to decentralize some authority in terms of the business case alone. The pressure to outsource will grow, partly because it will leave companies free to concentrate on what they do best rather than on what they merely do well. It will grow, too, because talent is scarce: Some of the brightest and best may choose to be free agents rather than wage slaves. However, when business is slack, employees may be less enthusiastic about going it alone; and outsourcing will have drawbacks when companies are keen to keep direct control over their quality of service and the reputation of their brands.
The benefits of Internet technologies depend not on their wizardry alone (which in coming years will seem remarkably ordinary and natural just as the phone does now). Companies will reap the full benefits only if they have appropriate structures and cultures. In creating those calls for skillful leadership, leaders must be able to cope not only with change, disruptive and continuous, but also with the pressures on decision makers to digest a ceaseless torrent of new data—a task that the next generation of managers will be better able to do. Leaders must be good at communicating both with the outside world and with their own people, and able to withstand the sense of managing in a fishbowl, visible to all. They must be as adept at making business decisions as at managing public opinion and issues, such as the environment and corporate social responsibility. Running a big company will remain one of the world's most complex and demanding tasks.
In the 21st century, we will see increased communication, dependence and assistance among people around the world. In each hemisphere, people’s dependence upon one another is growing. Business organizations, government agencies and private companies – including non – profit organizations and non – governmental organizations – jointly use products, capital and human resources. They want to expand production, capital and resources together and also expand into other parts of the world. To overcome competitors therefore, new management methods are needed. To achieve targeted results, managers need to have a detailed knowledge and understanding of management-related subjects.
The biggest changes will inevitably be those that go with the grain of what is already happening. Internet technologies will thus reinforce outsourcing, a trend that has been in progress for at least two decades. They will further reduce inventory, a move that began long ago with just-in-time lean production. They will bolster globalization, allowing companies to manage overseas operations and connect with foreign suppliers in more intricate ways. They will highlight the emphasis on the customer that so many companies strive to achieve. They will accentuate the need for talented and inventive people, who will have an even sharper idea of their financial worth on the world market for human capital. They will enable the flat structures of modern businesses to operate more effectively and make them even less hierarchical.
Indeed, one of the truly remarkable things about these technologies is the extent to which they reinforce trends already under way. This reflects the fact that many of the things they do are not entirely new: Proprietary electronic networks have long allowed large companies to do what smaller firms can now emulate. But such networks, and packaged software applications such as ERP, tend to be cumbersome and expensive, forcing companies to accommodate them. By comparison, the Internet is flexible, accessible, inexpensive, and ubiquitous.
In the future, Internet technologies will give companies new control over their relations with their customers. The Internet will not just widen reach, allowing companies to reach new markets; more important, it will provide ways to deepen existing relationships. Here, as in many other areas, the development of a culture of trust will do the most to deepen the relationship. In addition, companies will develop more sophisticated tools to identify their most profitable customers, to retain them, and to sell them extra products. They will find subtle ways to price discriminate, for example, through developing two familiar concepts, loyalty schemes and clubs.
Given the importance of creativity and new ideas to corporate success, companies must work harder than ever to recruit and retain the right staff and to create a corporate culture that encourages loyalty and effective collaboration. With recruitment, as with customer management, identifying those people likely to contribute most to corporate profitability and concentrate on retaining and developing them will be critical. With staff, as with customers, acquisition costs will encourage companies to care about retention because profits per worker take time to accrue.
One of the earliest and most visible effects of Internet technologies is on purchasing. Here, a genuinely new business model has arisen: the electronic exchange, which will take several different forms, but will be built around a single standard that will allow different industries and different companies within an industry to transact freely with one another. In networks and in marketplaces, applying determined standards is one of the keys to realizing value. In purchasing within individual companies, central discipline will also be essential if companies are to benefit from savings and from new suppliers.
More far-reaching will be the impact on the management of supplier networks. Here, the key will be the power of Internet technologies to make information available simultaneously to many different points in a system. The transformation of the supply chain into an ecosystem will bring the biggest rewards when the whole production process can become more modular, so that different stages that once took place sequentially can now occur simultaneously. That change will speed production, reduce output, and increase the flexibility with which companies can respond to changing customer tastes.
In the past, the costs of transferring information have been one of the main factors determining the structure of the company. Now, that is far less true, and the consequence is that companies can make decisions about whether or not to outsource some process or to decentralize some authority in terms of the business case alone. The pressure to outsource will grow, partly because it will leave companies free to concentrate on what they do best rather than on what they merely do well. It will grow, too, because talent is scarce: Some of the brightest and best may choose to be free agents rather than wage slaves. However, when business is slack, employees may be less enthusiastic about going it alone; and outsourcing will have drawbacks when companies are keen to keep direct control over their quality of service and the reputation of their brands.
The benefits of Internet technologies depend not on their wizardry alone (which in coming years will seem remarkably ordinary and natural just as the phone does now). Companies will reap the full benefits only if they have appropriate structures and cultures. In creating those calls for skillful leadership, leaders must be able to cope not only with change, disruptive and continuous, but also with the pressures on decision makers to digest a ceaseless torrent of new data—a task that the next generation of managers will be better able to do. Leaders must be good at communicating both with the outside world and with their own people, and able to withstand the sense of managing in a fishbowl, visible to all. They must be as adept at making business decisions as at managing public opinion and issues, such as the environment and corporate social responsibility. Running a big company will remain one of the world's most complex and demanding tasks.
References:
http://hbswk.hbs.edu/archive/2839.html
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